Tuesday, 4 August 2015

Building an infantry combat vehicle

A BMP-2 infantry combat vehicle (image courtesy Military Today)

By Ajai ShuklaBusiness Standard, 4th Aug 15

Incompetence dogs the defence ministry’s
plan to harness Indian defence companies to develop a “future infantry combat
vehicle” (FICV) --- an armoured battle-taxi for the infantry to keep pace with
tanks. The ministry started out well by deciding to buy the FICV in the “Make”
category of the defence procurement procedure, under which Indian companies are
funded to develop “high technology, complex systems”. In this case, two vendors
were to design and develop separate FICVs, with the defence ministry
reimbursing 80 per cent of their costs. The better one would be mass-produced
to replace the army’s 2,600 BMP-2 vehicles that are now obsolescent.

A fine plan, but the ministry has failed
twice in evolving a model for selecting the two “development agencies” (DAs), the
vendor consortia who will compete to build the FICV. In 2012, the defence
ministry cancelled the Expression of Interest (EoI) it had issued two years
earlier to four vendors --- Larsen & Toubro, Tata, Mahindra and the
Ordnance Factory Board (OFB). The reason: after the companies submitted their
strategies and plans, a defence ministry official observed that the EoI had omitted
to specify the methodology for deciding the two winners. Anticipating that the
losing vendors might approach the courts, the ministry scuppered the EoI and
started afresh.

It took another three years to formulate
selection criteria and issue a fresh EoI, but the ministry finally managed it
on July 16. As this newspaper reported (July 17, “After 5-year delay, tender issued in Rs 50,000-cr Future Infantry
Combat Vehicle project”) EoIs were issued to ten Indian companies ---
Mahindra; Bharat Forge; L&T; Punj Lloyd; Tata Power; Tata Motors; Pipavav
Defence; Rolta India; Titagarh Wagons, and the OFB. They have been asked to
build a tracked vehicle that would carry a crew of three and also eight combat-kitted
infantrymen. While the FICV’s weight is not specified, it must be amphibious
and so can be no heavier than 18-20 tonnes. It must be air-portable in the air
force’s IL-76 and C-17 aircraft. Finally, it must fire anti-tank guided
missiles out to ranges beyond 4,000 metres.

While this is not an insurmountable
technological challenge, there remain lacunae in the evaluation methodology
that the EoI lays out for selecting the two DAs. There is insufficient
incentive to indigenise, which should be the primary objective in a “Make”
project. And the ministry’s unfailing urge to support the OFB has resulted in
skewing the evaluation criteria to favour large companies with enormous
installed capacities, rather than lean organisations oriented towards high-tech
innovation.

The EoI specifies that vendor responses will
be graded in four categories, each having a certain weightage. These four
criteria are: commercial assessment (26.08 per cent); technical capability
assessment (34.24 per cent); critical technology assessment (31.37 per cent),
and technical specification assessment (08.31 per cent). To answer the
perfectly legitimate question of how each criterion was allocated such pinpoint
weightage, the ministry declares that these were “arrived at by using a complex
method called the Analytical Hierarchical Process (AHP) model.”

Beyond the jargon, we learn the best vendor
response in each category will be allocated full marks, with the rest scoring
lower in proportion to the merit of their bids. A Business Standard analysis, however,
finds problems in the grading process.

Take the first parameter, the “commercial
assessment”, with a weightage of 26.08 per cent. In this, the defence ministry
has asked for four parameters: the company’s/consortium’s annual turnover,
profit after tax, net worth and fixed assets. There seems little reason to set
so much store by company size, especially since the defence ministry gave this
zero weightage in the “Make” category EoI for the Tactical Communications
System (TCS); and only 10 per cent weightage in the EoI for the Battlefield
Management System (BMS). In the FICV EoI, it might seem as if L&T would score
highest in this segment, but the defence ministry has shielded its wayward
child, the OFB, by mandating that the ministry would mark the OFB in this
segment at its own discretion. Meanwhile, Tata Motors, which should logically
be a strong candidate for building an FICV, will score poorly here due to its large
loss last year. This might make other companies --- including group company,
Tata Power --- reluctant to join a Tata Motors consortium.

The second evaluation criterion is
“technical capability assessment” with 34.24 per cent weightage. This evaluates
the R&D capability of a company/consortium across its entire spectrum of
activity. In the TCS and BMS evaluations, credit was given only for R&D
capabilities in areas directly related to the project. Now, broad-based credit
would allow Tata Motors and Mahindra to benefit from R&D in their small car
projects, even if that has little “carry-over” to building an FICV. Similarly,
L&T would benefit from R&D expenditure in L&T Infotech. Meanwhile
smaller companies with higher R&D spends in percentage terms might lose out
because their absolute R&D spends are lower.

In this same category, the EoI favours
vendors with large fixed capacities in brick-and-mortar manufacturing. It asks
for minute details of bending and cutting machines installed, while no credit is
given for electronics and system integration capabilities. Here again, the OFB
stands to benefit as a vertically integrated organisation with large capacities
installed at taxpayer’s expense. Says a private sector chief executive: “I may
wish to outsource a range of machining activities, while retaining high-tech
design and electronics for myself. Why should an EoI discriminate against such
a business model? In a project that is going into a development phase, why is the
defence ministry looking for production facilities?”

The third evaluation criterion is “critical
technology assessment”, with a weightage of 31.37 per cent. It requires
companies/consortia to offer as many “core technologies” and “critical
technologies” as possible, specifying some 40 technologies, of which almost
half relate to engines and transmissions. Vendors need not develop technology. Credit
can be obtained simply by signing a Memorandum of Understanding (MoU) with a
foreign technology partner, who undertakes to provide the rights and licences for
manufacturing a specified product in India. Since a foreign vendor can provide
MoUs to multiple Indian companies, theoretically all ten FICV bidders could
submit an MoU from the same foreign vendor.

The fourth and last criterion of “technical
specification assessment” carries a tiny weightage of 8.31 per cent. This
involves proposing specifications for the FICV. With the ministry specifying
some capabilities and demanding certain technologies, this assessment largely
writes itself.

A betting man could make good money on the
outcome of this EoI. It is structured to ensure that the OFB emerges as one DA.
The second will most likely be L&T, with its size, installed capacities and
engineering capability. The gamble really centres on what consortia these two
will assemble. The OFB would probably tie up with Russia’s Kurganmashzavod, which
it has earlier partnered in building the BMP-2 in Medak. Its other likely partner
would be Bharat Forge, which has a tie-up with Israeli electronics firm,
Rafael, which would supply the FICVs missile, night vision and sighting systems
and active protection systems. This consortium’s offer will essentially be
another Russian vehicle with Israeli electronics.

The other likely DA, L&T, could partner
Tata Power (Strategic Engineering Division); a tried and tested consortium that
has emerged tops in the first two “Make” projects. This consortium might also
suck in BAE Systems, which had earlier tied up with Mahindra, a partnership
that came unravelled.

But, first, to make a good choice, the
defence ministry needs to get its evaluation criteria in order.

4 comments:

Anonymous
said...

Tata motors incurred huge losses and it was awarded huge defense contracts this year. In other words, is taxpayers' money being used to keep these huge family owned loss making companies profitable? Another similar example is Reliance, which makes huge profits from Govt contracts or by selling nearly their entire produce to GOI. In other words, how different are these companies from PSUs? The DRDO was created to make India self reliant wrt defense R&D and production. What happens to this huge setup created and sustained with taxpayers' money?Why defense of the country, is becoming a get rich quick scheme for shady companies with negligible experience or expertise in defense?

If specific details are provided and asked for then selection processis favored and not everyone can participate. If the requirements are open ended then it is incompetent. Wow you are dead both ways. I had to admit the entire process is corrupt but it doesn't make sense to write about everything and finding fault with it.

West and Russia have been building these machines over the 75 years . They have also been battle proven in world war 2 and subsequent conflicts all over the worldIndia will,take time to mature in such technologies

Sir,the whole infantry combat vehicle spec is moored in a doctrine "cold start ?" and doctrines are forever esp with army suffering from it's own elite capture by armoured corps types - no wonder all the cognoscenti don't ask how many men will it carry ? what cost budgets are indicative ? OROP/ CBG debate/ tejas-rafale-fgfa/ defence budgets are just other reports you do for a hobby.good, please write and report as if platforms are evaluated in vacuum.in india without a tri services bureaucracy to take informed decisions, decisions are indeed taken by those who are least informed.I wish building an army by post ww I Germany was studied more dispassionately and universally.last but not the least missile tech is fossilised and we are acquiring platforms whose specs we will revise over the luxury of so many wars that we will fight under nuclear umbrella, excellent!